Planners cut economic projections further

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By Beatrice M. Laforga

ECONOMIC MANAGERS on Wednesday slashed their gross domestic product (GDP) growth targets for 2021 and 2022, abandoning original hopes for expansion of up to eight percent, while revising this year’s forecast to a tighter range following earlier quarters’ slower-than-expected clips.

The same day saw the Asian Development Bank (ADB) maintaining its already-downgraded six percent GDP growth projection for this year and the 6.2% for 2020, according to the regional lender’s Asian Development Outlook Supplement.

The Development Budget Coordination Committee (DBCC), in its 177th meeting yesterday, scaled down its growth targets to 6.5-7.5% for 2020 to 2022, from 7-8% originally, while maintaining a target band of 6.5-7.5% for next year.

Socioeconomic Planning Secretary Ernesto M. Pernia said state planners trimmed their medium-term targets in the face of persistent global economic slowdown due largely to unresolved trade tensions between the United States and China.

“Trade tensions between the USA and China driving lower global economic growth, leading in turn to weaker demand for our exports; also creating uncertainty that dampen foreign investments in emerging economies, including the Philippines,” Mr. Pernia said in a mobile phone message yesterday.

The DBCC also revised its GDP growth target this year to 6-6.5%, narrower range than its already tempered previous target of 6-7%. “For the year we’re actually proposing a tighter band because we already have the Q1-Q3 (GDP) numbers… because if we say it’s 6-7%, then it’s no longer credible given that we already have the first three quarters,” National Economic and Development Authority (NEDA) Undersecretary Rosemarie G. Edillon said in the press conference after the DBCC meeting.

Economic growth picked up to 6.2% last quarter after the 5.5% average in the first half, bringing the year-to-date pace to 5.8% compared to the year-ago 6.2%. It would take 6.7% growth in the fourth quarter to enable the full-year average to reach the low end of the official target.

For the medium-term, Ms. Edillon said that the government will “stick to prudent fiscal management.”

The DBCC also downgraded its assumptions for other macroeconomic indicators, including the dollar price of Dubai crude oil per barrel, the peso-dollar exchange rate as well as its projections on growth of goods sold abroad, as well as merchandise and service imports.

The interagency body — which consists of the Department of Budget and Management, the Finance department, NEDA, the Office of the President and the Bangko Sentral ng Pilipinas — now sees the peso ranging at P51-52 per dollar this year, compared to its P51- to 53-per-dollar forecast it gave in July. It also revised its assumption for peso-dollar exchange to P51-54 for 2020-2022 from the P52-55 previously.

For the dollar price of Dubai crude, which is used as a benchmark for local prices of oil products, the assumption was reduced to $63-64 per barrel this year and $55-70 per barrel in 2020-2022. This compares to the $60-75 per barrel it previously projected for 2019-2022.

The assumption for the 364-day Treasury bill rate was also revised down to 5.1-5.3% in 2019 (from 5.5-6.5%) and 3.5-4.5% in 2020 to 2022 (from 5-6%).

Similarly, the six-month London Interbank Offered Rate (LIBOR) assumption was trimmed to 2.3-2.4% this year and 1.5-2.5% in 2020 to 2022, from the previous forecast of 2.5-3.5% on 2019-2022.

The assumption for goods export growth was also scaled down to one percent in 2019 and four percent next year “due to continuing unresolved trade tensions,” from its previous forecasts of two percent and six percent, respectively.

“However, the assumptions for 2021 and 2022 are retained at six percent as global economic activity is expected to recover in the medium-term,” the DBCC said.

Ms. Edillon told reporters during the briefing that assumptions for goods imports were likewise lowered to two percent this year from a previous forecast of seven percent, while the assumption for 2020 to 2022 was maintained at eight percent. “This is supported by robust domestic growth outlook, so it was has already been adjusted accordingly,” she said.

Service import growth projection for this year was trimmed to two percent from three percent previously, but forecasts for 2020 and for 2021-2022 were retained at four percent and five percent, respectively.

The assumption for service export growth was retained at nine percent from 2019 to 2022.

The DBCC sees the average inflation rate for 2019 to clock in at 2.4% — in line with the central bank’s forecast — amid “relatively stable prices” for consumers, and maintained a 2-4% range for 2020-2022.

The DBCC adopted a slightly lower revenue target for next year at P3.49 trillion from the P3.54-trillion program it set in its meeting last March.

“Well, again, you have to remember that the economy slowed because of the drop in the budget. I guess those are the effects of those slowdown,” Finance Secretary Carlos G. Dominguez III told reporters after the briefing.

Revenues are projected at P3.85 trillion for 2021 and P4.31 trillion for 2022.

State economic planners also set the 2020 deficit cap at an equivalent of 3.2% to GDP.

Mr. Dominguez also said that they maintained their debt-to-GDP ratio cap at 42%.

In its latest report, ADB retained its economic growth forecast for the country, along with Indonesia (5.1% for 2019 and 5.2% for 2020) and Malaysia (4.5% for 2019 and 4.7% for 2020).

“GDP growth is seen accelerating in Q4 of 2019 and throughout 2020, supported by investment as more infrastructure projects come onstream. Accommodative fiscal and monetary policies will support domestic demand. Growth forecasts are maintained at 6.0% for 2019 and 6.2% for 2020,” ADB said in its report.

This is against the region’s downgraded GDP growth forecast of 4.4% from 4.5% previously, with growth forecasts for Singapore and Thailand trimmed while those of Brunei and Vietnam were bumped up. “With the exception of these two economies (Brunei and Vietnam), continued export declines and weaker investment weigh on growth prospects in the subregion.”

Growth outlook of select Asian economies